Correlation Between Valneva SE and Smith Douglas

Can any of the company-specific risk be diversified away by investing in both Valneva SE and Smith Douglas at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Valneva SE and Smith Douglas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Valneva SE ADR and Smith Douglas Homes, you can compare the effects of market volatilities on Valneva SE and Smith Douglas and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Valneva SE with a short position of Smith Douglas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valneva SE and Smith Douglas.

Diversification Opportunities for Valneva SE and Smith Douglas

0.64

Correlation Coefficient

Valneva SE  Smith Douglas

Poor diversification

The 3 months correlation between Valneva and Smith is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Valneva SE ADR and Smith Douglas Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Douglas Homes and Valneva SE is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Valneva SE ADR are associated (or correlated) with Smith Douglas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Douglas Homes has no effect on the direction of Valneva SE i.e., Valneva SE and Smith Douglas go up and down completely randomly.

Pair Corralation between Valneva SE and Smith Douglas

Given the investment horizon of 90 days Valneva SE ADR is expected to under-perform the Smith Douglas. But the stock apears to be less risky and, when comparing its historical volatility, Valneva SE ADR is 1.02 times less risky than Smith Douglas. The stock trades about -0.14 of its potential returns per unit of risk. The Smith Douglas Homes is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,415  in Smith Douglas Homes on September 15, 2024 and sell it today you would earn a total of  822.00  from holding Smith Douglas Homes or generate 34.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Valneva SE ADR  vs.  Smith Douglas Homes

Valneva SE ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valneva SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Smith Douglas Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smith Douglas Homes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Valneva SE and Smith Douglas

The main advantage of trading using opposite Valneva SE and Smith Douglas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valneva SE position performs unexpectedly, Smith Douglas can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Smith Douglas will offset losses from the drop in Smith Douglas' long position.

The idea behind Valneva SE ADR and Smith Douglas Homes pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.